S. Korea should shift away from rice import quotas

South Korea should shift away from a quota system on rice imports to ease pressure from the World Trade Organisation (WTO) to open its markets for the grain, agricultural industry and government officials in the country said on Thursday.

Although they suggested switching to a system of high tariffs that would still curb shipments into the country, removing caps would mark a key psychological shift in a politically-sensitive sector and could potentially pave the way for lower duty in future.

Rice exporters in countries including China and the United States have been closely watching South Korea's import policy, hoping to ship more grain to Asia's fourth-largest economy.

"We should have switched to a tariff scheme 10 years ago," a senior government source with direct knowledge of the matter said on the sidelines of a hearing on the issue, adding that this would be cheaper for the country in the long term.

A 20-year-old agreement with the WTO has seen South Korea gradually increasing import quotas for the national staple to 408,700 tonnes this year. Under the system, the country must import exactly the amount specified in the annual quota.

But the international trade group is looking to boost South Korean purchases under a new deal set to be negotiated from October.

The Northeast Asian country is understood to be considering either proposing at least doubling import quotas gradually or suggesting a system of high tariffs on imports after obligatory purchases of 408,700 tonnes had been made each year.

At the hearing, most industry officials said the latter would result in lower imports than increasing quotas, but others argue tariffs would eventually fall due to upcoming free trade talks.

The duty amount would be a steep 300-500 percent, but proponents said this would bring prices for imported rice in line with the local grain. They said that level should also be acceptable under WTO rules.

China has typically accounted for 50-60 percent of South Korea's total rice imports, the United States for 20-30 percent and Thailand for 10-20 percent, according to government data.

Of the 159 WTO members, only South Korea and the Philippines have quota systems for rice imports, while others use tariffs.

South Korea aims to produce 4.15 million tonnes of rice this year.

Angry Farmers

But farmers in the country, who have a history of street protests, argue that both proposals should be binned, demanding that the government fight to keep the current quota system.

"While maintaining the current import policy, the government should help increase local rice production and guarantee production costs for local farmers," said Kim Young-ho, president of the Korean Peasants League, a farmers' group.

Another participant at the conference said: "We already depend heavily on grain majors such as Monsanto and Cargill for corn and soybean imports. If they say they will not provide rice later, we would have to beg for our main staple."